An investment adviser is helping a couple plan a retirement portfolio. The adviser has recommended three stocks—Allied Electronics, Bank United, and Consolidated Computers. Following are the annual return and variance for each stock and the covariance between stocks:
The couple wants a total portfolio return of at least .11. Determine the proportion of each stock to include in the portfolio to minimize the overall risk.
. Mark Decker has identified four stocks for his portfolio, and he wants to determine the percentage of his total available funds he should invest in each stock. The alternative stocks include an Internet company, a computer software company, a computer manufacturer, and an entertainment conglomerate. He wants a total annual return of .12. From historical data, he has determined the average annual return and variance for each of the funds, as follows:
He has also estimated the covariances between stocks, as follows:
Determine the percentage of Mark’s total funds that he should invest in each stock to minimize his overall risk.
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